Arm Holdings Stock Forecast: ARM tracks Nasdaq lower amid negative macro activity

Arm Holdings gained 24.7% on Thursday debut.
ARM stock sells off Friday after initial rally.
Higher Oil prices are affecting market sentiment as inflation indicators rise this week.
United Auto Workers initiates strikes at Ford, GM and Stellantis factories.
Taiwan Semiconductor tells suppliers to delay equipment orders.

Arm Holdings (ARM) stock is being hit by profit-taking on Friday. After spiking 24.7% from its IPO price on Thursday, ARM stock rose to $69 following the opening bell on Friday but since then has fallen to the lower $60s. The NASDAQ Composite, meanwhile, is down almost 2% at the time of writing.

Shares of the UK's leading chip design firm debuted at $51 a share on Thursday.

A number of negatives have reached the fore on Friday to create more uncertainty among equity traders. These include the United Auto Workers (UAW) announcing a worker strike at multiple US auto factories, Taiwan Semiconductor (TSM) telling suppliers to delay their equipment deliveries due to falling demand, Oil (WTI) continuing to tack on gains after crossing the $90 level earlier this week and greater acceptance of Thursday’s Producer Price Index coming in above consensus.

Arm Holdings stock news: A terrific first day

Despite flat or falling earnings over the past year, Arm is indeed a strategic global tech company that occupies an important niche in semiconductor applications. Arm Holdings designs low-power components found in 99% of the world’s smartphones and licenses their intellectual property to a host of the most dominant chipmakers worldwide.

That is why many of its peers in the semiconductor industry bought stakes in its Initial Public Offering (IPO) this week. In fact, about ten different tech companies – including Taiwan Semiconductor, Nvidia (NVDA), Intel (INTC) and Alphabet (GOOGL) – purchased a combined $735 million of the $4.9 billion float that amounted to more than 15% of the total allotment.

Wall Street banks and other book runners claimed that the sales were oversubscribed by 10X, making it somewhat expected that the first trading session would witness a rally due to retail investors trying to obtain their piece of the pie.

Another factor in ARM’s successful debut is that Softbank Chief Executive Officer Masayoshi Son, whose firm owns about 90% of Arm Holdings, told CNBC broadcasters that he is in no hurry to sell off the rest of the company. With such a small float trading compared with total shares outstanding, it is unsurprising that demand for shares would overwhelm supply, causing the ARM price to rise.

Uncertainty in the market dents optimism on Friday

Taiwan Semiconductor told major suppliers on Friday to expect delays in the delivery of state-of-the-art equipment used at its fabs to make advanced computer chips. ASML Holding (ASML) is one of the primary suppliers affected in this case. Management said a drop in demand was the primary reason for the delay, but many outsiders think issues surrounding its new fabs in Arizona are also causing the delays.

The stock market ignored Oil (WTI) reaching $90 on Thursday in light of Arm’s successful IPO, which pushed up the share prices of many other tech stocks. But the US Oil standard has continued its streak of gains on Friday and has reached $90.30.

Traders are beginning to reflect how how oil prices could resurrect the economy’s inflation problem after Wednesday’s Consumer Price Index (CPI) and Thursday’s Producer Price Index (PPI) both came in hot.

The Federal Reserve (Fed) largely focuses on core inflation, which strips out volatile energy and food prices. However, if Oil prices remain this high (and some pundits are already predicting $100/barrel oil), then higher transportation costs should eventually funnel their way into core inflation. A more noticeable rise in core inflation could force the central bank to raise interest rates another time by the end of the year.

And when we discuss Oil, we can’t ignore the machines that run on them. The UAW was hinting at a strike all week, but many pundits predicted that a deal would go into effect before the strike was initiated. Factories owned by Ford (F), General Motors (GM) and Stellantis (STLA) all suspended labor early on Friday.

On Friday, just 13,000 total workers are on strike thus far. According to UAW President Shawn Fain, however, eventually, all 146,000 workers could be on strike soon enough. Analysts estimate this could cause a loss of as much as $500 million in profits per week for each automaker.

"They could double our raises and not raise car prices, and still make millions of dollars in profits," Fain said. "We're not the problem. Corporate greed is the problem."

The UAW is calling for a 36% overall rise in contract pay, a return to defined-benefit pensions, as well as protections against battery factories reducing union employment for internal combustion engine (ICE) factories in the future since battery factories utilize more automation. The companies have countered with offers to raise pay by between 17.5% and 20%.

Last but not least, China on Friday announced sanctions against Lockheed Martin (LMT) and Northrop Grumman (NOC) for selling arms and technology to Taiwan. This event raises tensions between the globe’s two main superpowers.

Semiconductor stocks FAQs

What is a semiconductor?

A semiconductor is a term for various types of computer chips. Officially called semiconductor devices, these computer chips rely on semiconductor materials like silicon and gallium arsenide to process the electrical current that produces the modern world of computing. They come in many shapes, sizes, enhancements and configurations such as diodes, transistors and integrated circuits to more complicated applications like DRAM memory, simple processors and even GPUs.

What types of semiconductor companies are there?

First, there are the pure chip designers, such as Nvidia, AMD, Broadcom and Qualcomm. These companies use sophisticated software to design and test chips. Second, there are the equipment manufacturers that provide the machines necessary to build computer chips. These include ASML and Lam Research. Then, there are foundries that manufacture the chips. These include Taiwan Semiconductor and GlobalFoundries. Last of all are the integrated device manufacturers who design their own chips and additionally manufacture themselves. These include Samsung and Intel.

What is Moore’s Law?

It is the observation that the number of transistors in an integrated circuit doubles every two years. The “law” is named after Gordon Moore, who founded Fairchild Semiconductor and later Intel. The doubling is possible due to the shrinking size of process nodes or parts in the computer chip. In 1971 the advanced commercial manufacturing had reached 10 microns in width. In 1987 semiconductor technology had advanced to 800 nanometers in width. By 1999, this process had moved to 180 nanometers. By 2007, the size had dropped to 32 nanometers, and this fell all the way to 3 nanometers in 2022, which is close to the size of human DNA.

How large is the semiconductor industry?

In 2022, the global semiconductor industry had revenues just under $600 billion. In total, the industry shipped 1.15 trillion semiconductor units in 2021. The leading nations involved in the semiconductor supply chain are Taiwan, the United States, China, the Netherlands, South Korea, Japan and Israel.

Arm Holdings stock forecast

Judging purely from ARM’s 5-minute stock chart from Thursday, traders will find it interesting that the Fibonacci Extension levels seem to be holding sway. In the afternoon hours on Thursday, ARM stock quickly rallied to the 23.6% Fibo level at $65.80 but quickly experienced resistance at that level.

Later it made a move that moved sideways once the 38.2% Fibo was conquered at $67. From there Arm Holding stock moved up more gradually directly under the 50% Fibo placeholder at $67.97.

This makes it likely that bulls will have their eye on the 61.8% and 78.6% Fibo levels at $68.95 and $70.33, respectively. Support appears to be at the $68 level.

5-minute ARM stock chart

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